Hotels suffer summer slide in rates


POSTED: Monday, October 05, 2009

Summer was anything but hot for Hawaii's hoteliers, who lost an estimated $238 million as they grappled with the worst busy season in more than two decades, according to a report released today from Hospitality Advisors LLC.

Occupancy declined for the 18th straight month in August with a 3.5 percentage-point drop to 70.9 percent, Hospitality Advisors said. In an attempt to stem the losses, hoteliers continued deep discounting, which resulted in a 15.9 percent decline in the state's average daily room rate.

But the drop in revenue per available room could be the most telling sign that the hotel market is in trouble. While hoteliers on average were charging $177.79 for a room, they were only making $126.05, according to Hospitality Advisors.

“;Occupancy might have only fallen a few percentage points, but when the rate is down, hoteliers collect substantially less,”; said Murray Towill, president of the Hawaii Hotel & Lodging Association.





        Occupancy rates at Hawaii hotels in August and the same month last year:



Statewide70.9 percent74.4 percent
By Island
Oahu78.3 percent80.4 percent
Kauai65.8 percent74.2 percent
Maui66.2 percent69.1 percent
Big Island57.2 percent63.5 percent


Source: Hospitality Advisors LLC





The August decline capped the weakest summer since 1987, said Joseph Toy, Hospitality Advisor's president and chief executive officer. “;Summer occupancy for the three months June through August averaged 68.1 percent, compared to occupancies in the mid-80 percent range for the summer season just three years ago,”; Toy said.

While Oahu's luxury hotel occupancy, which hit 83.3 percent in August, was one of the few bright spots in Toy's report, Towill said some of the increase could be attributed to rate slashing.

“;Consumers will trade up,”; he said. “;They'll pay a little more to be on the water or in a certain hotel when rates compress.”;

In the lagging economy, hotel rates are driving the market, said Beth Churchill, vice president of sales and marketing for Aqua Hotels & Resorts. “;Rate is the game, but there is only so much you can do,”; Churchill said.

Jerry Gibson, area vice president of Hilton Hawaii and general manger of the Hilton Hawaiian Village, said hoteliers must be careful about how they yield their rates. “;There becomes a certain base where you just can't go below because it costs you money,”; he said.

The pressure on hotels is being felt throughout the visitor industry, which lost 1,000 jobs in August.

Duty Free Hawaii, which just reported a seven-person layoff in its Pacific Division to the state Department of Labor and Industrial Relations, is the latest in a long line of visitor industry-related casualties.

“;One of the things that we have been reminded of in recent months is how the downturn in the visitor industry ripples throughout the economy and affects even those businesses that don't think they are related to the visitor industry,”; Towill said.

Churchill said she expects performance for Hawaii's hotel industry will be flat in 2010, with meaningful recovery unlikely before 2011. “;I'm trying to be hopeful but it's ugly out there,”; she said.